Championship Auto Racing Teams, Inc. Reports Third Quarter 2001 Results And Updated Financial Guidance For 2001 DETROIT (October 24, 2001) - Championship Auto Racing Teams, Inc. (NYSE: MPH) today announced revenues, expenses, net income and ...
Championship Auto Racing Teams, Inc. Reports Third Quarter 2001 Results And Updated Financial Guidance For 2001
DETROIT (October 24, 2001) - Championship Auto Racing Teams, Inc. (NYSE: MPH) today announced revenues, expenses, net income and earnings per share for the third quarter ended September 30, 2001.
The number of events held in a particular quarter will affect the comparability of earnings information from quarter to quarter. CART conducted nine events in the third quarter of 2001 and 2000. Indy Lights conducted four races in the third quarter of 2001 compared to six races in the same period in the prior year. Toyota Atlantic's conducted six races in the third quarter of 2001 and six races in 2000.
Total revenues for the third quarter of 2001 were $29.6 million, an increase of $1.8 million, or 7%, from the comparable quarter of 2000. "Although we ran the same number of races in CART as we did in the third quarter of 2000, the increase in revenues was primarily attributable to the higher sanction fees we received for our two European races" stated CART's CFO Thomas Carter. The increase in sanction fees was partially offset by decreases in revenues from sponsorship, television, engine leases and rebuilds and other revenues.
Total expenses for the third quarter of 2001 were $34.0 million, compared to $17.5 million for the third quarter of 2000. Included in the 2001 expenses was a non-recurring pre-tax charge of $3.5 million, including expenses, resulting from a litigation settlement with Texas Motor Speedway related to the canceled race in April 2001. In addition, the 2001 expenses include a non-recurring charge of $8.5 million from the discontinuance of the Dayton Indy Lights Championship (American Racing Series, Inc.), compromised of non-cash impairment charges for goodwill and equipment of approximately $7.6 million and other strategic charges of approximately $900,000.
Net loss for the third quarter of 2001 was ($1.7) million compared to net income of $7.8 million in the third quarter of 2000. On a diluted per common share basis, net loss was ($0.11) in 2001 compared to net income of $0.50 in the third quarter of 2000. The non-recurring charges for the Texas Motor Speedway settlement and discontinuance of the Dayton Indy Lights Championship resulted in a $0.15 and $0.37 per diluted share charge, respectively, net of taxes, for the three month period. On a pro forma basis, excluding the non-recurring charges, net income for the third quarter was $0.41 on a diluted per common share basis.
"We continued to set the stage for CART's future with several initiatives we announced during the third quarter," said CART Chairman and CEO Joseph F. Heitzler. "CART confirmed its new, three-year domestic television package with Fox Cable Networks/Speedvision and CBS in August. We also announced a new race in Mexico City which will pay CART its largest North American sanction fee in the Company's history and a new race in Denver where we will play an active role in the management of the race along with Dover Downs Entertainment. Additionally, we announced our intent to focus our development series efforts behind the Toyota Atlantic Championship beginning in 2002. Each of these will play a significant role for CART as we move forward."
Total revenues for the nine months ended September 30, 2001 were $55.8 million compared to $60.5 million in 2000. Total expenses were $57.9 million compared to $40.9 million in 2000. Net income was $2.3 million compared to $15.9 million in 2000. This resulted in earnings per share on a fully diluted basis of $0.15 compared to $1.02 for the same period in the prior year. On a pro forma basis, excluding non-recurring charges related to the Texas Motor Speedway settlement and the discontinuance of Indy Lights, net income for the nine months ended September 30, 2001 was $10.2 million, or $0.66 per share on a fully diluted basis. There were 16 CART Fed-Ex races in the nine months ended September 30, 2001 compared to 17 races in the same period in the prior year.
Revised Annual Earnings Guidance for 2001
The Company is revising its annual earnings guidance that was provided in July, as follows:
Sanction fees for 2001 are now forecast to be approximately $47.1 million, an increase of approximately 21% when compared to 2000
Sponsorship revenue is now forecast to be approximately $13.3 million, a decrease of approximately 37% when compared to 2000. The decrease is primarily attributable to the loss of the minimum guarantee upon termination of the marketing agreement, as previously announced.
Television revenue is forecast to be approximately $5 - $5.5 million, which is comparable to 2000. Television contracts with ESPN and Brazilian television have minimum guarantee provisions that contain annual escalation amounts. CART receives additional television revenue from advertising, radio programming and rights fees, which will be less than originally forecast.
Engine lease rebuilds and wheel sales are now forecast to be approximately $1.1 million, a decrease of approximately 46% from 2000. The decrease is due to fewer entries in the Dayton Indy Lights development series.
Other revenues are now forecast to be approximately $4.1 million, a decrease of approximately 44% from 2000. The decrease is due to a reduction in royalty revenue and sales from licensed merchandise, lower membership and entry fees due to fewer entries in the two CART development series and certain non-recurring revenue received in 2000 that we will not receive in 2001.
Race payments are forecast to be approximately $18.6 million, an increase of approximately 21% from 2000. The increase is attributable to expense reimbursements to CART's race teams related to international races in 2001.
Race expenses are forecast to be approximately $11.2 million, an increase of approximately 13% from 2000. The increase is due to added personnel and increased travel costs in 2001 when compared to 2000.
Cost of engine rebuild and wheel sales are now forecast to be approximately $500,000, a decrease of approximately 23% from 2000. The decrease is due to fewer engine rebuilds and wheel sales, as described above.
Administrative and other indirect expenses are forecast to be approximately $31.5 million, an increase of approximately 24% from 2000. The increase is due to developing the company's strategic plan and infrastructure and an increased investment in marketing, promotion, public relations, television and entertainment-related projects. The increase is also due to a charitable contribution to the September 11 Relief Funds.
Non-recurring litigation charges related to a settlement with Texas Motor Speedway are forecast to be $3.5 million, including expenses. These expenses relate to a canceled race in April 2001, as discussed previously.
Non-recurring asset impairment and strategic charges are forecast to be $8.5 million from the discontinuance of the Dayton Indy Lights Championship as discussed previously.
Depreciation and amortization is forecast to be approximately $1.6 million, an increase of approximately 18% in 2001 when compared to 2000. The increase is due to additional capital expenditures forecast at between $1.0 - $1.5 million for 2001.
Earnings per share on a fully diluted basis is expected to be approximately $0.11 - $0.13. The non-recurring charges for the Texas Motor Speedway settlement and discontinuance of the Dayton Indy Lights Championship will result in a charge of $0.15 and $0.37 per diluted share, respectively, net of taxes.
Heitzler commented, "We've budgeted dollars to invest in our business. Part of this increased investment is for the development and implementation of our strategic plan to build CART's future. In addition, we've increased our investment in television and Internet expenditures to help increase the exposure of CART to more fans. We've also increased our marketing opportunities through co-promotions with our race promoters that are intended to increase attendance and promote a consistent 'CART Branding'. We firmly believe that these expenditures will help CART thrive and contribute to our future growth."
CART's quarterly results vary based on the number of races held during the quarter. In addition, the mix between the type of race (street course, superspeedway, domestic or international) and the sanction fees attributed to those races will affect quarterly results. Consequently, changes in the race schedule from year to year, with races held in different quarters, and the timing of certain initiatives will result in fluctuations in the Company's quarterly results and affect comparability. Therefore, CART provides guidance on an annual basis and will not provide quarterly forecasts.
Share Repurchase Update
On April 17, 2001, the Board of Directors authorized the purchase of up to 2.5 million shares of its outstanding common stock in open market or privately negotiated transactions. Repurchases under the program will be made at the discretion of management based upon market, business, legal, accounting and other factors, and accordingly, there is not a guarantee as to the timing or number of shares to be repurchased.
Since the authorization of the repurchase program, the Company has repurchased 1,054,000 shares of its common stock through its share repurchase program at an average cost of $14.69 per share including commissions. In the third quarter, 468,100 shares of common stock were repurchased at an average cost of $14.29 per share including commissions. The Company intends to retire such shares.
Championship Auto Racing Teams, Inc. (NYSE: MPH) owns, operates and markets the FedEx Championship Series. Champions Michael Andretti, Gil de Ferran and Jimmy Vasser are among the drivers who battle for the FedEx Championship Series title on oval circuits as well as temporary and permanent road courses. CART also owns and operates its top two development series, the Dayton Indy Lights Championship and the Toyota Atlantic Championship. Learn more about CART's open-wheel racing series at www.cart.com.
Statements made in this release that state the Company's or management's beliefs or expectations and which are not historical facts or which apply prospectively are forward-looking statements. It is important to note that the Company's actual results could differ materially from those contained or implied by such forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in the Company's SEC filings including, but not limited to, the Form 10-K and subsequent Forms 10-Q. Copies of those filings are available from the Company and the SEC.
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